Alkane’s Mandalay merger begins paying shareholders

Merger delivers a step-change in earnings

Alkane Resources Ltd (ASX:ALK) has emerged from its merger with Mandalay Resources as a very different company: three operating mines, two jurisdictions and enough cash generation to begin returning capital. Revenue surged to A$935.8 million in FY2026, while profit after tax rose to A$228.7 million from A$33.0 million a year earlier.

The comparison needs a footnote. The statutory result includes Costerfield and Björkdal only from 5 August 2025, when the merger completed, so the year-on-year jump reflects both enlarged scale and a much stronger commodity-price environment. On a full-year operational basis, including the two acquired mines from 1 July 2025, Alkane produced 168,337 ounces of gold equivalent at an AISC of A$2,925 per ounce.

Gold-equivalent sales for the statutory period reached 164,878 ounces at an average realised gold price of A$5,664 an ounce. Costerfield also sold antimony at an average A$32,032 a tonne. Operating cash flow came in at A$460.3 million, leaving cash, bullion and listed investments of A$453.9 million at 30 June, with net cash of A$416.8 million after borrowings.

Dividend and buy-back mark a new capital phase

The board has declared Alkane’s first dividend, a fully franked 2 cents per share payment due on 1 October 2026, and approved an on-market buy-back of up to A$50 million over the next 12 months. The moves shift the investment proposition beyond mine growth alone, although the company says capital returns will be balanced against reinvestment and future transactions.

The balance sheet gives Alkane room to pursue that strategy. The company repaid Tomingley’s A$45 million project facility in August 2025, and its new A$110 million revolving credit facility remained undrawn at year-end. A A$40 million contingent instrument facility had been drawn to A$31.2 million, while equipment financing accounted for the remaining borrowings.

Mine performance points to growth, but costs remain decisive

Tomingley produced a record 82,973 ounces at an AISC of A$2,429 an ounce, beating its production guidance. Construction of the 8.1-kilometre Newell Highway realignment is intended to clear the infrastructure constraint on the San Antonio and Roswell resources, with completion targeted for the first half of calendar 2027 and open-pit mining expected to begin in FY2028.

Costerfield delivered 44,527 full-year gold-equivalent ounces at an AISC of A$2,491, while exploration expanded resources around Brunswick South, Kendal and Cuffley. Björkdal produced 40,837 ounces at an AISC of A$3,991, with the Storheden resource entering the group’s growth story and a satellite open pit planned for FY2027. The statutory group AISC of A$2,907 was just above the top of guidance, meaning executives received only 60% of their maximum short-term incentive outcome.

FY2027 guidance holds production broadly steady

Alkane expects FY2027 production of 163,000 to 177,000 ounces of gold equivalent at an AISC of A$2,900 to A$3,200 an ounce. It has budgeted A$160 million to A$190 million of growth capital and A$55 million to A$65 million for exploration, including work at Brunswick South, Storheden, Tomingley and the Boda-Kaiser gold-copper project.

The resource base also expanded or held firm across the operating portfolio. Group Ore Reserves stood at 1.374 million ounces of gold, alongside 15,000 tonnes of contained antimony. Boda-Kaiser remains a substantial but longer-dated option, with baseline environmental studies underway across a 7,200-hectare area ahead of a potential Gateway application.

Risks sit beneath the strong headline numbers

The report identifies the usual mining sensitivities, from metal prices and geology to production costs, permitting, safety and tailings management. It also discloses regulatory proceedings concerning alleged non-compliance with approval requirements for a tailings storage facility. Alkane says the matter is likely to be resolved within six months and is not expected to be material to its financial position or operations, but the disclosure remains a specific item to track.

Alkane’s first climate-related financial disclosures also leave a notable gap: the company has established Scope 1 and Scope 2 reporting, but no formal emissions-reduction targets or transition plan. Management identified extreme weather, energy-price volatility and changing demand for antimony and copper as material climate-related risks or opportunities, while estimating that a 50% increase in energy costs would represent an indicative A$20 million annual sensitivity based on FY2026 consumption.